Indonesia bids to woo carmakers away from Thailand

Honda opened its second car manufacturing factory in Indonesia this month, and Datsun is set to follow suit in April.

Toyota is also looking at expanding production in Indonesia, officials say, as ongoing political uncertainty in Thailand sees businesses and investors look elsewhere in the region.

Indonesian officials have made no secret that they want to compete with Thailand for a large slice of the region's vehicle production.

Recent developments in Thailand could boost their efforts to woo big names to invest more in South-east Asia's largest economy, where car ownership remains relatively low but is set to rise in the coming decade.

"We're improving our physical infrastructure, and have had good economic growth and political stability," said Mr Budi Darmadi, director-general for high-technology priority industries, at Indonesia's Industry Ministry.

"Consumer spending power is increasing, and there is a more skilled labour force. All this has attracted investors," he told The Straits Times.

He said Indonesia is ready to help accommodate new investments, citing recent tax incentives, the growth of supporting car component industries and a second terminal dedicated to handling vehicle cargo in North Jakarta that will help exports, slated for operations later this year.

This week, Bloomberg news agency reported that foreign investors had withdrawn some US$3 billion (S$3.8 billion) from Thai stocks since protests began three months ago, and put US$190 million into Indonesian shares this year.

Malaysia, too, has moved to compete with Thailand for investments in the car industry. Two weeks ago, it eased restrictions on foreign carmakers by allowing all hybrid and electric passenger vehicles to be produced in the country.